Mr. Ravi Sharma reports
CANACOL ENERGY LTD. ANNOUNCES 2P RESERVES OF 85 MMBOE WORTH US$1.3B BTAX AND 13 YEAR RESERVE LIFE INDEX
Canacol Energy Ltd. has released its light, medium and heavy crude oil and conventional natural gas reserves and deemed volumes for the fiscal year ended Dec. 31, 2016. The corporation engaged DeGolyer and MacNaughton Canada Ltd. (DMCL) to prepare independent reserves evaluations for its two primary conventional natural gas fields in Colombia and for its oil reserves in Colombia and deemed volumes in Ecuador. The DMCL evaluated reserves and deemed volumes represent 92 per cent of the corporation's total reserves and deemed volumes on a total proven, 1P, basis.
The corporation's conventional natural gas reserves are located in the Lower Magdalena Valley basin, Colombia. Canacol's light and medium crude oil reserves are located in the Llanos and Middle Magdalena Valley basins, Colombia. Additional deemed volumes of light and medium crude oil are developed in the Oriente basin, Ecuador. Heavy crude oil reserves are located in the Caguan basin, Colombia.
CANACOL ENERGY GROSS RESERVES AND DEEMED VOLUMES SUMMARY
Proven Proven Proven Total Total Total proven
developed developed undeveloped proven proved + probable
producing non-producing (PUD) (1P) + probable + possible
Product type (PDP) (PDNP) (2P) (3P)
Conventional natural gas Bcf 236.0 1.0 45.2 282.3 411.0 503.2
Light and medium crude (3) MMbbl 1.0 2.0 2.0 5.1 7.5 9.3
Heavy crude MMbbl - 0.1 2.1 2.1 5.0 8.4
Total oil equivalent (4) MMboe 42.4 2.3 12.0 56.7 84.6 106.0
Before-tax NPV-10 (5) MM U.S.$ $ 693.0 $ 36.5 $ 170.0 $899.5 $1,330.8 $1,594.2
After-tax NPV-10 (5) MM U.S.$ $ 506.9 $ 27.9 $ 116.0 $650.7 $ 945.3 $1,128.9
(1) The numbers in this table may not add exactly due to rounding.
(2) All reserves and deemed volumes are represented at Canacol's working interest share before royalties.
(3) Light and medium crude volumes include working interest volumes and deemed volumes.
(4) The term boe means a barrel of oil equivalent on the basis of 5,700 cubic feet of natural gas to one
barrel of oil as per Colombian regulatory practice.
(5) Net present value (NPV) is stated in thousands of U.S. dollars and is discounted at 10 per cent.
Highlights include:
- Proven developed producing, PDP, reserves and deemed volumes increased by 49 per cent since Dec. 31, 2015, to total 42.4 million barrels of oil equivalent at Dec. 31, 2016;
- Total proven plus probable, 2P, reserves and deemed volumes totalled 84.6 million boe at Dec. 31, 2016, with a before-tax value discounted at 10 per cent of $1.3-billion (U.S.), representing $8.79 (Canadian) per share;
- Achieved 1P reserve replacement of 166 per cent and 2P reserve replacement of 194 per cent based on calendar 2016 gross reserve and deemed volume additions of 9.3 million boe (1P) and 11 million boe (2P);
- Achieved 2P finding and development costs (F&D) of $4.71 (U.S.) per boe for its gas assets and $5.31 (U.S.) per boe as a corporate total for calendar 2016;
- Achieved 2P F&D of $2.52 (U.S.) per boe for its gas assets and $3.48 (U.S.) per boe as a corporate total for the two-year period ended Dec. 31, 2016;
- Recorded 2P finding, development and acquisition costs (FD&A) of $5.04 (U.S.) per boe for its gas assets and $5.66 (U.S.) per boe as a corporate total for calendar 2016;
- Recorded a 2P reserves life index (RLI) of 13 years based on annualized fourth quarter 2016 production of 17,778 boepd.
Ravi Sharma, chief operating officer of Canacol Energy, commented: "The corporation has achieved significant conventional natural gas exploration and development drilling success over the past 3.5 years. During this time, we have added over 315 billion cubic feet of 2P conventional natural gas reserves from commercial success on 11 out of 12 wells, representing a 52-per-cent compound annual growth rate (CAGR). As of Dec. 31, 2016, Canacol's total 1P reserves and corresponding before-tax NPV-10 are 57 million boe and $900-million (U.S.), respectively, or $5.47 per share. The corporation's 2P reserves and corresponding before-tax NPV-10 are 85 million boe and $1.3-billion (U.S.), respectively, or $8.79 per share.
"Canacol's management team continues to execute its growth strategy with respect to high-value Colombian gas. The corporation forecasts 130 million cubic feet of gas per day of natural gas production for exit rate 2017 and 230 million cubic feet per day of natural gas production for exit rate 2018. These targets represent production growth of 44 per cent from current production of 90 million cubic feet per day and sequential production growth of 77 per cent from 130 to 230 million cubic feet per day to exit 2018."
Discussion of year ended Dec. 31, 2016, reserves report
During the six-month period from June 30, 2016, to Dec. 31, 2016, the corporation recorded increases in certain reserve categories as a result of the drilling and completion of exploration locations at Nelson-6, Nispero-1 and Trombon-1 on the Esperanza natural gas block in the Lower Magdalena Valley basin, Colombia.
The attached tables summarize information from the independent reserves report prepared by DeGolyer and MacNaughton Canada, effective Dec. 31, 2016, and the independent reserves report prepared by Petrotech Engineering Ltd., effective Dec. 31, 2016. The DMCL 2016 report covers 100 per cent of the corporation's oil reserves and deemed volumes and 90 per cent of Canacol's natural gas reserves on a 1P basis, including the Nelson and Clarinete fields.
Each independent reserves report was prepared in accordance with definitions, standards and procedures contained in the Canadian oil and gas evaluation handbook and National Instrument NI 51-101 (standards of disclosure for oil and gas activities). Additional reserve information as required under NI 51-101 is included in the corporation's annual information form, which will be filed on SEDAR by March 31, 2017.
CANACOL GROSS RESERVES AND DEEMED VOLUMES
FOR THE YEAR ENDED DEC. 31, 2016
Reserve category (1) Dec. 31, 2015 Dec. 31, 2016
(Mboe) (2) (Mboe)
Proven developed producing 28,413 42,426
Proven developed non-producing 2,882 2,265
Proven undeveloped 21,717 12,045
Total proven (1P) 53,012 56,735
Total proven + probable (2P) 79,229 84,570
Total proven + probable + possible (3P) 93,032 106,016
(1) All reserves and deemed volumes are Canacol working interest before
royalties.
(2) Mboe is defined as thousands of barrels of oil equivalent. Gas
volumes are converted to boe using a factor of 5,700 cubic feet per boe
as per Colombian regulatory practice.
FIVE-YEAR CRUDE OIL PRICE FORECAST -- DMCL REPORT, DEC. 31, 2016, VERSUS DEC. 31, 2015
Reserve
report date 2017 2018 2019 2020 2021
WTI U.S.$/bbl Dec. 31, 2016 $55.00 $59.16 $63.46 $68.98 $72.52
WTI U.S.$/bbl Dec. 31, 2015 56.10 60.34 66.86 72.52 77.29
FIVE-YEAR GAS PRICE FORECAST -- DMCL AND PETROTECH REPORTS, DEC. 31, 2016, VERSUS PETROTECH 2015
Reserve
report date 2017 2018 2019 2020 2021
Volume-weighted average gas price U.S.$/MMBtu Dec. 31, 2016 $5.25 $5.25 $5.37 $5.50 $5.50
Volume-weighted average gas price U.S.$/MMBtu Dec. 31, 2015 6.21 6.25 6.47 6.70 6.97
(1) Gas price forecast is based on existing long-term contracts adjusted for inflation.
RESERVES AND DEEMED VOLUMES NET PRESENT VALUE BEFORE AND AFTER TAX SUMMARY (1)
Before-tax After-tax
net asset value net asset value
Reserve category Dec. 31, 2016 Dec. 31, 2016 Dec. 31, 2016 Dec. 31, 2016
(M U.S. $) (2) ($ Cdn/share) (2) (M U.S.$) (2) ($ Cdn/share) (2)
Proven developed producing $ 692,992 $ 3.88 $ 506,871 $ 2.44
Proven developed non-producing $ 36,493 - $ 27,886 -
Proven undeveloped $ 170,046 - $ 115,975 -
Total proven (1P) $ 899,531 $ 5.47 $ 650,732 $ 3.55
Total proven + probable (2P) $1,330,752 $ 8.79 $ 945,302 $ 5.82
Total proven + probable + possible (3P) $1,594,155 $ 10.82 $1,128,868 $ 7.23
(1) Net present values are stated in thousands of U.S. dollars and are discounted at 10 per cent.
The forecast prices used in the calculation of the present value of future net revenue are based
on the price decks described in the table. The DMCL price deck at Dec. 31, 2016, is included in
the corporation's annual information form. The DMCL and Petrotech forecasts for gas prices at
Dec. 31, 2016, are included in the corporation's annual information form.
(2) Net asset value (NAV) is calculated at Dec. 31, 2016, NPV10 less estimated net debt of
$190-million (U.S.) (being $255-million of bank debt less estimated net working capital of
$65-million) divided by 174 million basic shares outstanding as at Dec. 31, 2016. NAV
calculations are converted to Canadian dollars at $1 (U.S.) equals $1.3427 (Canadian).
RESERVE LIFE INDEX (RLI)
Reserve category (1) Dec. 31, 2015 Dec. 31, 2016
(yr) (1) (yr) (2)
Total proven (1P) 16 9
Total proven + probable (2P) 24 13
(1) Calculated using average three-month ended
Dec. 31, 2015, production of 9,064 barrels of
oil equivalent per day annualized. Production
volumes include Ecuador incremental production
contract barrels.
(2) Calculated using average three-month ended
Dec. 31, 2016, production of 17,778 boepd
annualized. Production volumes include Ecuador
incremental production contract barrels.
(3) RLI (reserve life index) is calculated by
dividing a category of year-end reserves by
the expected current production rate.
YEAR ENDED DEC. 31, 2016, CANACOL GROSS RESERVES RECONCILIATION (1)
Total oil Light/med oil Heavy oil Sales gas NGL Total
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mbbl) Mboe
Total proven
Opening balance (Dec. 31, 2015) 7,815 5,632 2,183 257,624 - 53,014
------ ------ ------ ------- --- ------
Extensions - - - - - -
Improved recovery - - - - - -
Technical revisions (2) 701 746 (45) 19,286 - 4,082
Discoveries (3) - - - 30,027 - 5,268
Acquisitions - - - - - -
Dispositions - - - - - -
Economic factors (4) (1) (1) - - - (1)
Production (1,298) (1,290) (8) (24,681) - (5,628)
------ ------ ------ ------- --- ------
Closing balance (Dec. 31, 2016) 7,217 5,087 2,130 282,256 - 56,735
------ ------ ------ ------- --- ------
Total oil Light/med oil Heavy oil Sales gas NGL Total
(Mbbl) (Mbbl) (Mbbl) (MMcf) (Mbbl) Mboe
Total proven + probable
Opening balance (Dec. 31, 2015) 13,967 8,614 5,353 371,992 - 79,228
------ ------ ------ ------- --- ------
Extensions - - - - - -
Improved recovery - - - - - -
Technical revisions (2) (205) 140 (345) (6,476) - (1,340)
Discoveries (3) - - - 70,167 - 12,310
Acquisitions - - - - - -
Dispositions - - - - - -
Economic factors (4) - - - - - -
Production (1,298) (1,290) (8) (24,681) - (5,628)
------ ------ ------ ------- --- ------
Closing balance (Dec. 31, 2016) 12,464 7,464 5,000 411,002 - 84,570
------ ------ ------ ------- --- ------
(1) The numbers in this table may not add due to rounding.
(2) Technical revisions (conventional natural gas) are associated with the Nelson
and Clarinete gas fields, technical revisions (light/medium oil) are associated
with LLA23 and Ecuador assets, and technical revisions (heavy oil) are associated
with the Ombu block.
(3) Discoveries are associated with the Oboe discovery on the VIM-5 block, and Nispero,
Trombon and Porquero discoveries on the Esperanza block.
(4) Economic factors are related to price and royalty factor changes.
(5) Production volumes include Ecuador incremental production contract barrels.
RESERVE METRICS RECONCILIATION -- CANACOL WORKING INTEREST BEFORE ROYALTY (1) (2) (3)
Calendar 2016 Two years ended Dec. 31, 2016
Conventional natural gas Total (4) Conventional natural gas Total (4)
Capital expenditures $63,770 $82,880 $93,973 $164,418
Capital expenditures --
change in FDC (5) (11,100) (27,600) 21,300 (22,700)
-------- -------- -------- --------
Total F&D (6) $52,670 55,280 115,273 141,718
Net acquisitions 3,665 3,665 41,711 41,711
-------- -------- -------- --------
Total FD&A (7) (8) $56,335 58,945 156,984 183,429
-------- -------- -------- --------
Reserve additions (Mboe) 11,174 10,407 45,768 40,742
Reserve additions -- net acquisitions 0 0 6,580 6,445
-------- -------- -------- --------
Reserve additions
Including net acquisitions (Mboe) 11,174 10,407 52,348 47,187
-------- -------- -------- --------
F&D costs ($/boe) (6) $4.71 $5.31 $2.52 $3.48
FD&A costs ($/boe) (7) (8) $5.04 $5.66 $3.00 $3.89
-------- -------- -------- --------
(1) The numbers in this table may not add due to rounding.
(2) The 2016 capital expenditure numbers exclude $33-million (U.S.) related to the Jobo 2
gas plant finance lease.
(3) All values in this table are stated on a 2P (total proven plus probable) basis.
(4) Total oil and gas include Colombian properties only. No Ecuadorean deemed volumes nor
capital has been included.
(5) FDC is the 2P (proven plus probable) future development capital. Capital expenditures
-- change in FDC -- are rounded to the nearest thousands of U.S. dollars.
(6) F&D -- finding and development costs -- on a 2P (total proven plus probable) basis.
(7) FD&A -- finding, development and acquisition costs -- on a 2P (total proven plus
probable) basis.
(8) With the finding and development costs, the aggregate of the exploration and development
costs incurred in the most recent financial year and the change during that year in
estimated future development costs generally will not reflect total finding and development
costs related to reserve additions for that year.
Canacol is an exploration and production company with operations focused in Colombia, Ecuador and Mexico.
Unaudited financial information
Certain financial and operating results included in this news release include net debt, capital expenditures, production information and operating costs based on unaudited estimated results. These estimated results are subject to change upon completion of the corporation's audited financial statements for the year ended Dec. 31, 2016, and changes could be material. Canacol anticipates filing its audited financial statements and related management's discussion and analysis for the year ended Dec. 31, 2016, on SEDAR on or before March 31, 2017.
We seek Safe Harbor.
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